Prudential Raises 2012 Dividend by 16% Helped by Asia Growth

By Kevin Crowley -
Mar 13, 2013

Prudential Plc (PRU), the U.K.’s biggest
insurer by market value, raised its dividend 16 percent as
profit beat estimates on rising income from Asian economies such
as Indonesia, Singapore and Malaysia. The shares rose.

The full-year payout increased to 29.19 pence a share in
2012, from 25.19 pence a share a year earlier, the London-based
firm said today in a statement. That beat the 26.5 pence a share
median estimate of 11 analysts surveyed by Bloomberg.

“It’s a collection of gems from Prudential, with strong
beats of consensus on almost every metric,” said Matthew Preston, a London-based analyst at Berenberg Bank with a buy
rating on the stock. “The rebasing of the dividend and the
early delivery of Asia targets are probably the highlights.”

Shares Rise

The stock rose 9.3 percent to 1,125 pence a share in London
trading, the biggest gain since Oct. 6, 2011, and valuing the
firm at about 28.8 billion pounds ($43 billion). Prudential has
climbed 41 percent in the last 12 months, making it the second-
best performer in the nine-member FTSE ASX Life Insurance Index. (FALIFE)

Operating profit from Asia increased 26 percent to 988
million pounds, boosted by higher sales in Indonesia, Singapore
and Malaysia. Asia became the highest contributor of cash to the
group for the first time, contributing 341 million pounds in
2012 compared with 40 million pounds in 2009, Prudential said.

“We’re only starting to write the first chapter in a very,
very powerful and very long story” in Asia, Chief Executive
Officer Tidjane Thiam, 50, said on a call with reporters. “We
have the people and the distribution to achieve the magnitude of
the upside.”

The ability for the insurer’s three divisions, the U.K.,
the U.S. and Asia, to fund themselves will provide the option of
breaking up the firm if its share price doesn’t fully recognize
the value of its assets, Thiam said in November.

‘Break-up Story’

“Asia has historically been supported by the cash cow U.K.
business,” Preston said. “This is obviously no longer the
case, and it provides a lot of strategic flexibility going
forward for the business, which could make it a potential break-
up story.”

Prudential’s “current strategy is working very well,”
Thiam said on the call. This creates “a very high benchmark”
for asset sales, he said.

A potential initial public offering of Jackson National
Life, Prudential’s U.S. business, is one reason behind the
recent share price rally, according to Alan Devlin, a London-
based analyst at Barclays Plc with a buy rating on the stock.

“Having an option doesn’t mean you have to exercise it,”
Thiam said. “If you take the U.S., for instance, there is
absolutely no reason today. given where markets and valuations
are, to do anything.”

Asset Management

Net income increased 55 percent to 2.2 billion pounds, or
86.4 pence a share, in 2012, the insurer said.

Aviva, the U.K.’s second-biggest insurer by market value,
said last week it plans to expand its Asian business cautiously
due to slowing growth in China. The firm gets almost 90 percent
of its life-insurance operating profit from the U.K., Ireland,
France, Spain and Italy.

“China is expected to grow between 5 and 10 percent so it
will be a more sensible strategy to invest in Europe right
now,” Thiam said, prompting Nic Nicandrou, the firm’s chief
financial officer, to say it “was a joke.”

Prudential Plc has no relation to Newark, New Jersey-based
Prudential Financial Inc.